While the transition to a lower carbon future and net zero emissions garners much attention, one limiting factor is often overlooked—the electric grid. As the infrastructure that delivers electricity from power plants to consumers, the electric grid serves as the backbone of our energy system. Greening the electric grid is essential for the built environment to decarbonize at scale and for most real estate organizations to meet ambitious science-based net zero emissions targets.

What is a Green Electric Grid?
While there has been a remarkable increase in renewable energy capacity in the last decade, traditional fossil fuels like coal and natural gas still account for about 80% of energy usage in the U.S. A greener electric grid involves a shift from traditional, carbon-intensive energy sources to cleaner, more sustainable alternatives and measures to improve grid resilience. These include the use of smart grid technologies (e.g., smart meters, energy storage systems, etc.), the optimization of energy flows, and the integration of distributed energy resources like rooftop solar systems and battery storage.

The Pace of Change
While the fossil fuel industry seeks to slow down the transition to a greener grid, market dynamics and regulatory forces are driving progress. Multiple new largescale offshore wind farms were recently approved off the east coast and legislative efforts, like the Inflation Reduction Act (IRA), have created a flurry of activity in the renewable energy sector. The IRA aims to mitigate inflationary pressures on the energy sector, ensuring a stable economic environment for grid-related investments. Through financial incentives, the legislation encourages the adoption of innovative technologies, including smart grid solutions, advanced metering infrastructure, and energy storage systems. Utility companies are also increasingly offering renewable energy options, supporting EV adoption, investing in microgrids, and implementing battery storage solutions to improve grid resiliency.

Impact on the RE Industry
Leading real estate organizations are now setting ambitious science-based carbon emissions reduction targets through frameworks like the Science-Based Targets Initiative (SBTi), which aim to achieve net zero emissions by 2050 in alignment with the Paris Agreement. Achieving net zero emissions involves minimizing greenhouse gas (GHG) emissions and balancing any unavoidable emissions by removing an equal amount of greenhouse gases from the atmosphere, effectively neutralizing the overall carbon impact. In commercial real estate, this translates to 100% building electrification, pursuing all feasible on-site energy efficiency measures, maximizing the production of on-site renewable energy, and then neutralizing any remaining emissions through the purchase of off-site renewable energy. The most common strategies for procuring off-site renewable energy include the purchase of grid-tied renewable energy where available, renewable energy certificates (RECs), carbon offsets to neutralize on-site fossil fuel emissions, and pursuing a virtual power purchase agreement (VPPA) that supports the development of new renewable generation facilities at scale, typically in regions like the Midwest.

Considering physical constraints prevent most commercial buildings from generating 100% of energy consumed through on-site renewable energy, real estate organizations must purchase off-site renewable energy to support a claim of net zero carbon emissions. This is complicated by the inconsistent availability of grid-tied renewable energy across the U.S, a result of climatic limitations but also regulatory hurdles. For example, wind and solar energy are plentiful in the Midwest but scarce in the Southeast. Therefore, a portfolio concentrated in the Southeast would likely need to purchase off-site renewable energy generated in other regions, or purchase the environmental attributes of the renewable energy if not physically delivered (i.e., purchase of RECs or VPPA), to neutralize residual carbon emissions.

Reasons for Optimism
With the rapid growth of renewable energy, declining costs, expansion of utility-scale battery storage, grid modernization initiatives, and supportive policies and incentives, the transition to a cleaner, greener, more sustainable electric grid is gaining momentum. Continuing to prioritize upgrades to transmission lines, investing in advanced energy storage solutions, moving away from carbon-intensive energy sources, and updating aging infrastructure are all necessary to minimize carbon emissions across the U.S. In the real estate industry, the path to net zero emissions involves electrifying buildings, implementing on-site energy efficiency measures, and maximizing on-site renewable energy generation as economic and regulatory forces continue to infuse more utility-scale renewable energy generation into all regions of the U.S. electric grid.

C7231fb3-b8d4-4eee-c2e8-d8287b5da120

By Paige Redsun- ESG Certification Specialist- breea

-GRESB

About breea
We are breea, a boutique ESG advisory company that advises sophisticated real estate portfolios on corporate responsibility and the transition to a lower carbon future. We take great pride in the expertise, responsiveness, and dependable service we provide our clients.